"They had a number of chances but we did too and could have capitalised on it.
"We are still well in the game and have a great match to look forward to next week.
"Of course we can overturn it. It was never going to be an easy match but this time next week we will be fitter again."
The defeat is the second in quick succession for Villa, who lost their opening Premier League match 2-0 at home to Wigan last Saturday.
Their form was also poor towards the end of last season as they faded badly having been in contention for a Champions League place at the turn of the year.
However, O'Neill refuses to press the panic button and instead is focusing on Monday's visit to Liverpool, before welcoming Vienna for the second leg three days later.
"The games are hard and approaching us pretty quickly but when we settle down this season we will be absolutely fine," O'Neill added.
"We need to improve and keep improving. As the whole squad gets wound up and fully fit then we will be OK."
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